Let’s get something straight from the jump:

Wholesaling is legal in most states.

But the way you do it, especially how you communicate with sellers and buyers, can make the difference between a clean payday and an illegal transaction.

The key factor? Disclosure.

If you’re assigning your contract for a fee and not telling the seller (or worse, pretending you're the buyer), you could be in violation of state laws on real estate licensing, deceptive practices, or both.

This article explains:

• Why disclosure matters

• What’s legally required (and what’s just best practice)

• How to keep your deals compliant, even in tight markets

Let’s break it down.

What Is an Assignment (And Why It’s a Legal Grey Area in Some States)?

An assignment of contract means you’re selling your rights as a buyer, not the house itself. You’re not selling real estate. You’re selling the contract to buy real estate.

This is a legal mechanism. But the moment you:

• Advertise the property (not the contract)

• Talk to buyers as if you own the home

• Fail to inform the seller you’re not the end buyer

…you start to cross into real estate agent territory.

And unless you’re licensed, that’s where the trouble begins.

States Are Cracking Down on Undisclosed Assignments

A growing number of states are revising or enforcing existing real estate laws that affect wholesalers. While some explicitly allow assignment with disclosure, others are tightening the rules.

Here are just a few examples:

Illinois

Requires wholesalers to be licensed brokers unless assigning 1 property every 12 months (or fewer), with full disclosure.

Oklahoma

House Bill 1820 (2021) requires wholesalers to disclose in writing that they’re assigning and to not advertise property without a license.

Kansas

SB 342 requires clear disclosure that the buyer is assigning and that they do not intend to purchase the property.

Nebraska, Ohio, and others

Have proposed similar legislation to crack down on misleading advertising and protect sellers.

These laws weren’t written to kill wholesaling. They were written to stop deceptive behavior.

And that’s where most trouble happens, not with the assignment itself, but with what the seller was (or wasn’t) told.

What Counts as Disclosure (and What Doesn’t)?

You might think, “Well, the contract has an assignment clause. That’s enough, right?”

Not necessarily. Buried fine print doesn’t cut it if the seller is under the impression that you are buying their house.

Bad Example (Not Disclosure):

“We’ll pay you cash, close quickly, and buy the home as-is.”

If you never tell them you’re not the actual buyer, and you’re making money selling the contract, this could be considered misleading in many states.

Good Example (Disclosure):

“I’m a real estate investor, and my business model involves finding great deals, getting them under contract, and then partnering with other buyers who might close on the property. I’m not always the end buyer. Sometimes I assign the contract to one of my buyers.”

Clear. Upfront. Honest.

Some states even require this in writing in the purchase agreement.

What Can Happen If You Don’t Disclose Your Assignment Intent?

The consequences vary by state, but here’s what can happen:

Civil Penalties

You could be sued by the seller for misrepresentation or fraudulent inducement, especially if they find out later that you made $25K and they feel deceived.

Fines From State Real Estate Commission

If you act as a broker (bringing buyer and seller together) without a license, many states impose hefty fines or cease-and-desist orders.

Reputation Damage

In tight-knit markets, word travels fast. One seller who feels tricked can burn your reputation with agents, title companies, and even buyers.

Loss of Deal

A deal can fall apart at title if the seller suddenly learns you’re not the one buying, and they feel duped.

It’s just not worth the risk.

How to Properly Disclose (and Still Get Deals Done)

You might worry that disclosure will scare sellers off. But here’s the truth:

Transparency builds trust.

Most motivated sellers care more about getting paid than who’s signing the final papers. What they hate is being surprised.

Here’s how to disclose properly, and stay compliant while keeping the deal alive.

1. Say It Out Loud Early

Don’t bury it in the paperwork. Say it upfront:

“I may assign this contract to a partner or another investor. They’ll close on it, not me, but you’ll still get the same price, and we’ll handle all the details.”

2. Put It in Writing in Your Contract

Use clear assignment language:

“Buyer may assign this contract. Seller acknowledges and agrees that buyer may assign rights to another entity or individual who will complete the transaction.”

Some states even require specific assignment disclosure language. Use a local attorney or a reputable wholesaler-friendly contract.

3. Title Company Clarity

• Let the title company know it’s an assignment. That way they can:

• Prepare the HUD/ALTA correctly

• Talk to the seller intelligently if needed

• Avoid legal issues that delay or kill the closing

4. Avoid Misleading Marketing

Don’t advertise the property for sale unless you’re licensed. Market your contract or say:

“Assignment of purchase contract available for XYZ property. Buyer to perform all due diligence. We do not own the property.”

How to Handle Pushback From Sellers

If a seller asks, “So are you buying it?”, and you’re assigning, don’t lie.

Instead, use this script:

“I work with a network of buyers and partners. I might fund it myself, or I might assign it to one of my capital partners. Either way, your price doesn’t change and we close just like normal, no delays.”

This keeps you legally clean and gives the seller confidence that their money isn’t at risk.

Bonus: States Where You Need to Be Especially Careful

As of now, the following states have laws, bills, or enforcement actions you should be aware of as a wholesaler assigning contracts:

• Illinois

• Oklahoma

• Kansas

• Nebraska

• Ohio

• Oregon

• Arizona (increasing scrutiny)

• Georgia (pending legislation)

This list is growing, and even if your state hasn’t passed laws yet, that doesn’t mean a seller or judge couldn’t go after you based on general consumer protection or deceptive trade practices.

When in doubt? Disclose.

When Assignments Might Not Be the Best Path

Sometimes, you’re better off double-closing instead of assigning, especially when:

• You expect a large fee that might raise seller eyebrows

• The seller is particularly sensitive to who is buying

• You want to protect your spread from the end buyer

• State law is ambiguous or trending toward restrictions

Yes, you’ll pay double closing costs. But sometimes that’s the cost of protecting your reputation and your deal.

Wholesaling Isn’t a Loophole, It’s a Business

If your business model depends on tricking people into selling to you under false pretenses, you don’t have a business. You have a legal time bomb.

But if you treat wholesaling like the problem-solving, marketing, and negotiation business it is, and keep your deals transparent, you can build a long-lasting, compliant, and profitable operation.

Tell the truth. Put it in writing. Make money anyway.

That’s how professionals do it.